Labour demand is "derived demand," that is, labour is hired in order to produce goods which are sold in the product market. For this reason, labour demand is always connected to the product market, especially in terms of the degree of competition, whether from foreign or domestic producers. In this chapter, we will address the following contents: Labour demand curve, short and long run, elasticity, competitiveness of Canadian labour, globalization. | Chapter Five Demand for Labour in Competitive Labour Markets Created by: Erica Morrill, Fanshawe College Chapter 5- © 2002 McGraw-Hill Ryerson Ltd. Chapter Focus Labour demand curve Short and long run Elasticity Competitiveness of Canadian labour Globalization Chapter 5- © 2002 McGraw-Hill Ryerson Ltd. Demand for Labour Factors of production inputs into the production of final goods Linked to the firms demand for goods/services Derived demand Chapter 5- © 2002 McGraw-Hill Ryerson Ltd. Employment Decisions Short-run – one or more factors of production cannot be varied Long-run – firm can adjust all of its inputs State of technical knowledge is assumed to be fixed Chapter 5- © 2002 McGraw-Hill Ryerson Ltd. Demand for Labour The quantity of labour services the firm would employ at each wage Depends on the firms objectives and constraints Objective is to maximize profits Chapter 5- © 2002 McGraw-Hill Ryerson Ltd. Firm’s Constraints Demand for product (output) . | Chapter Five Demand for Labour in Competitive Labour Markets Created by: Erica Morrill, Fanshawe College Chapter 5- © 2002 McGraw-Hill Ryerson Ltd. Chapter Focus Labour demand curve Short and long run Elasticity Competitiveness of Canadian labour Globalization Chapter 5- © 2002 McGraw-Hill Ryerson Ltd. Demand for Labour Factors of production inputs into the production of final goods Linked to the firms demand for goods/services Derived demand Chapter 5- © 2002 McGraw-Hill Ryerson Ltd. Employment Decisions Short-run – one or more factors of production cannot be varied Long-run – firm can adjust all of its inputs State of technical knowledge is assumed to be fixed Chapter 5- © 2002 McGraw-Hill Ryerson Ltd. Demand for Labour The quantity of labour services the firm would employ at each wage Depends on the firms objectives and constraints Objective is to maximize profits Chapter 5- © 2002 McGraw-Hill Ryerson Ltd. Firm’s Constraints Demand for product (output) Supply of labour (and other factors of production) Production function ( the maximum output given the various combinations of inputs) Fixed quantity of one or more factors of production (short run only) Chapter 5- © 2002 McGraw-Hill Ryerson Ltd. Theory of Labour Demand Examines the quantity of labour the firm desires given the market-determined wage rate given the labour supply function the firm faces Assume: The firm is a perfect competitor in the labour market. Chapter 5- © 2002 McGraw-Hill Ryerson Ltd. Market Behaviour A firm’s behaviour in the product market impacts demand for labour wage rate employment decisions The structure of the labour market affects supply curve - amount of labour available to the firm at various wage rates Chapter 5- © 2002 McGraw-Hill Ryerson Ltd. Categorizing the Structure of Product Markets Industry Structures perfect competition monopolistic oligopoly monopoly decreasing degree of competition Chapter 5- © 2002 McGraw-Hill Ryerson Ltd. .
